730222136-Rothaermel-6e-PPT-Ch01-ACCESS.pptx

business

1. Chapter 1 What Is Strategy? © Balls on stairs: Ilin Sergey/Shutterstock © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.

2. Learning Objectives Explain the role of strategy in a firm’s quest for competitive advantage. Define competitive advantage, sustainable competitive advantage, competitive disadvantage, and competitive parity. Assess the relationship between stakeholder strategy and sustainable competitive advantage. Conduct a stakeholder impact analysis. Explain the Analysis, Formulation, Implementation (AFI) Strategy Framework. 2

3. Strategic Management An integrative management field. Combines analysis, formulation, and implementation in the quest for competitive advantage. Mastery of strategic management enables you to: View a firm in its entirety. Think like a general manager. Position your organization for superior performance. 3

4. Strategy Goal-directed actions to gain and sustain superior performance relative to competitors. Companies compete for resources: New ventures: financial and human capital. Existing companies: profitable growth. Charities: donations. Universities: the best students and professors. Sports teams: championships. Celebrities: endorsements. 4

5. A Good Strategy Is Based on Three Elements A diagnosis of the competitive challenge. Analysis of the firm’s internal and external environments. A guiding policy to address the competitive challenge. Formulation. Results in corporate, business and functional strategies. A set of coherent actions to implement the firm’s guiding policy. Implementation. 5

6. Crafting a Good Strategy at Tesla The Competitive Challenge: Tesla must manufacture attractive and affordable vehicles using its new technology and build the required infrastructure such as charging station networks. A Guiding Policy: Tesla is building cost-competitive mass-market vehicles such as Models 3/Y. It has made significant investments in lithium-ion battery production across the globe. Coherent Actions: Tesla needs to ramp up production volumes to achieve economies of scale and has broken ground for a new factory in Shanghai, China. Tesla will not introduce any new vehicles for the time being. Tesla has made some proprietary technology available to the public. 6

7. Competitive Advantage Superior performance relative to other competitors in the same industry or the industry average. Competitive advantage is relative, not absolute. To assess competitive advantage, benchmark: Compare the firm to competitors in the same industry. Compare the firm to the industry average. 7

8. Sustainable Competitive Advantage A firm that is able to outperform its competitors or the industry average over a prolonged period. Example: Apple (smartphone industry): Sustainable competitive advantage over Samsung. Has lasted over a decade. 8

9. Competitive Disadvantage & Competitive Parity Competitive Disadvantage: a firm that underperforms: Its rivals. The industry average. For example, is 15% ROIC superior? It depends on the industry. Competitive Parity: two or more firms that perform at the same level. 9

10. How to Gain a Competitive Advantage Provide goods or services that: Consumers value more highly than those of its competitors, or Are similar to the competitors’ at a lower price. The rewards of superior value creation: Profitability. Market share. 10

11. Strategic Positioning A unique position within an industry that allows the firm to provide value to customers, while controlling costs. Value creation minus costs equal economic contribution. The greater, the better. Enhances the likelihood of competitive advantage. 11

12. Strategic Positioning Requires Trade-Offs Managers must make conscious trade-offs. How to allocate resources? Which activities to pursue? Example: the retail industry: Walmart: cost leader is a big box outlet, low prices. Nordstrom: differentiator, has professional salespeople, luxury setting. 12

13. A Unique Strategic Position A successful combination of strategic activities. Competitive advantage has to come from: Performing different activities. Performing the same activities differently than rivals. Example: Walmart: Strategic activities strengthen its position as cost leader. Big stores, low overhead, low wages. 13

14. What Strategy Is Not Grandiose statements: “We will be number 1,” “We will win.” A failure to face a competitive challenge: Blockbuster didn’t address Netflix, Redbox, Amazon Prime, and Hulu. Operational effectiveness, competitive benchmarking, or tactical tools: Examples: “pricing strategy,” “operations strategy,” “brand strategy.” These are good policies or initiatives, but not a strategy. 14

15. Value Creation Companies with a good strategy are able to provide products or services to consumers: At a price point that they can afford. That enables the company to make a profit. Value creation lays the foundation for a successful economy: Education. Infrastructure. Public safety. Healthcare. Clean water and air. 15

16. Stakeholders Organizations, groups, and individuals: Can affect or can be affected by a firm’s actions. Have a vested claim or interest in the performance or survival of the firm. Internal stakeholders: Stockholders, employees (including executives, managers, and workers), and board members. External stakeholders: Customers suppliers, alliance partners, creditors, unions, communities, media, and governments. 16

17. Internal and External Stakeholders in an Exchange Relationship with the Firm Exhibit 1.1 Access the text alternative for slide images. 17

18. Stakeholder Strategy An integrative approach to managing a diverse set of stakeholders to gain and sustain competitive advantage. Stakeholder management benefits firm performance: Cooperative stakeholders reveal important information. Increased trust lowers business transaction cost. Can lead to greater adaptability and flexibility. More predictable and stable returns. Stronger reputation. 18

19. A Decision Tool for Stakeholder Strategy Stakeholder Impact Analysis helps to recognize, prioritize and address stakeholder needs. Three important stakeholder attributes: power, legitimacy, and urgency: Power: when the stakeholder can get the company to do something that it would not otherwise do. Legitimate claims: perceived to be legally valid or otherwise appropriate. Urgent claims: require a company’s immediate attention and response. 19

20. Stakeholder Impact Analysis Exhibit 1.2 Access the text alternative for slide images. 20

21. The Pyramid of Corporate Social Responsibility Exhibit 1.3 Access the text alternative for slide images. Source: Adapted from A. B. Carroll (1991, July–August), “The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders,” Business Horizons : 42. 21

22. AFI Framework Effectively managing the strategy process is the result of: Analysis (A). Formulation (F). Implementation (I). This framework: Explains and predicts differences in firm performance. Helps leaders formulate and implement a strategy that can result in superior performance. 22

23. The AFI Strategy Framework Exhibit 1.4 Access the text alternative for slide images. 23

24. End of Main Content © McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.